Commercial Real Estate Crash

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thatchmo's picture
thatchmo
Status: Gold Member (Online)
Joined: Dec 14 2008
Posts: 456
Commercial Real Estate Crash

It seems to me that folks were saying way back, oh, a year or 18 months ago, that the Commercial Real Estate defaults and crash were going to be a sizable load of S that would HTF and bring on major economic grief.  Did I miss this event?   Aloha, Steve.

horstfam's picture
horstfam
Status: Bronze Member (Offline)
Joined: Sep 6 2008
Posts: 71
Re: Commercial Real Estate Crash

Steve,

One of the reasons you haven't seen/heard much is because of our "extend and pretend" economy. I have heard of shopping center owners that have stopped making mortgage payments (presumably because their tenants have gone out of business), but the bank is in such bad financial shape that they do not even send a late notice to the owner. Once  a late notice is issued, then the loan drops into a different category and becomes a liability to the bank rather than an asset. So, in order to keep the bank looking good, they just pretend.

And the developer/owners are stuck, too. If the bank "resets" their loan, say from $10M to $5M, they have to pay the IRS taxes on the difference. So, they didn't have the cash to make the payments, but now they are supposed to have the cash to pay the IRS, right.

Do you remember seeing those performers that would spin plates on the end of tall sticks? Well, amazingly enough, all of the spinning has stopped and the plates are now just sitting still on the sticks. One burp and we can kiss it all goodbye. (We can only imagine at this point that Uncle Benny has Super Glued the plates to the sticks! No more rules.)

PastTense's picture
PastTense
Status: Bronze Member (Offline)
Joined: Dec 13 2010
Posts: 47
Re: Commercial Real Estate Crash

I've read that in what have been the boom areas people see large numbers of

for rent, for lease signs. A good blog for real estate of all kinds is Calculated Risk:

http://www.calculatedriskblog.com/

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